US consumer confidence fell in October to the lowest level since July as high borrowing costs and soaring inflation take their toll on household budgets. The consumer confidence index slumped to 102.5 from a revised 107.8 in September, according to data released Tuesday by the Conference Board. Economists were expecting a reading of 106.5, per estimates from Refinitiv. A reading above 100 signals consumers have an optimistic attitude toward the economy. In February 2020, the consumer confidence index was 132.6. Consumer spending, which drives the US economy, has remained strong since the start of the Covid-19 pandemic, with high levels of goods purchasing during lockdowns, followed by robust spending on travel and dining out once restrictions were lifted. However, a global imbalance of supply and demand led to the current bout of decades-high inflation in the United States, which the Federal Reserve is trying to bring down through a series of jumbo-sized rate hikes. That has, in turn, pushed up borrowing costs, adding to higher overall expense for consumers, some of whom have begun to rein in their spending. Inflation’s impact on the holiday season Consumers’ short-term outlook remains “dismal,” said Lynn Franco, the Conference Board’s senior director of economic indicators. “Notably, concerns about inflation — which had been receding since July — picked up again, with both gas and food prices serving as main drivers,” Franco said in a statement. “Looking ahead, inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could result in a challenging holiday season for retailers.” Consumers’ levels of optimism dimmed for not only the current economic period but also what could come during the next several months. “There’s a real sense that people could delay purchases, but at the same time, there are going to be some purchases that just cannot be delayed,” said Jason Reed, a finance professor at the University of Notre Dame. “If you think of your wallet share like a pie chart, people are just going to continue to shuffle around what they’re spending on. And some things are going to eat up more of that wallet share -— like food and transportation costs right now — so I could imagine some other discretionary spending declining.” Consumers still hoping to buy a home Consumers also said they feel more pessimistic about the labor market, with a lower share of respondents saying they believe jobs are “plentiful.” While the job market has remained robust throughout much of this year and 2021, there have been some signs of cooling. In terms of big-ticket items, survey respondents said they planned to spend less on travel over the next six months, but reported higher intentions to buy homes, appliances and cars. “I was surprised that the intention to buy homes rose over the month given mortgage rates hovering around 7%,” Reed said. “Although consumers might be anticipating additional increases in mortgage rates and accelerate their home purchase plans.” Prices started to skyrocket in early 2021 and have hovered at around 40-year highs for the past several months. In September, the Consumer Price Index — which measures the changes in prices for a basket of consumer goods — was 8.2% higher than the period 12 months before. The latest CPI report also showed that inflation had seeped more fully into the services sector, where price hikes are harder to fall. Stubbornly high inflation has prompted the Federal Reserve to take aggressive action, raising its benchmark interest rate by 3.25 percentage points in six months’ time. The central bank is expected to raise rates again by another three-quarters of a percentage point at its policy meeting next week.